Wealth in Russia: HNW Investors 2017

Table of Contents

EXECUTIVE SUMMARY 2

1.1. Russian HNW individuals typically source their wealth through mining, oil, and gas 2

1.2. Key findings 2

1.3. Critical success factors 2

2. PROFILING THE RUSSIAN HNW INVESTOR 5

2.1. The mining, oil, and gas industry is the primary source of HNW wealth 5

2.1.1. Most Russian HNW individuals are males over the age of 40 5

2.1.2. First-generation entrepreneurship is the leading source of Russian HNW wealth 6

2.1.3. Many HNW investors have built their fortunes through mining, oil, and gas 7

2.1.4. The majority of HNW investors in Russia hold executive positions 9

2.2. Expats in Russia account for a higher proportion than the regional average 10

2.2.1. Expats in Russia account for 6% of the HNW population 10

2.2.2. New visa regulations are designed to encourage immigration 10

2.2.3. Most HNW expats residing in Russia originate from Germany 11

3. RUSSIAN HNW INVESTMENT STYLE PREFERENCES 14

3.1. Lack of time drives discretionary mandates 14

3.1.1. HNW investors opt for advisory asset management 14

3.1.2. Wealthy Russians expect their wealth managers to be highly experienced 15

3.1.3. Russia’s HNW investors place nearly half of their managed wealth with their main wealth manager 16

3.2. Investors’ reluctance to relinquish control means that advisory asset management will remain the mandate of choice 17

3.2.1. Demand for automated services remains weak 17

3.3. An appetite for advice is still on the rise 19

3.3.1. Demand for advisory mandates will strongly increase 19

3.3.2. A reluctance to give up control is driving demand for advisory mandates 20

3.3.3. A share of Russian HNW wealth will remain in execution-only platforms 21

4. UNDERSTANDING ASSET ALLOCATION TRENDS AMONG RUSSIAN HNW INDIVIDUALS 22

4.1. Already high allocations to bonds will continue to rise 22

4.1.1. Investors are loyal to cash and bonds 22

4.1.2. Russian HNW clients enjoy dividend income 23

4.1.3. Bond investments are forecast to experience the highest increase 25

4.1.4. Cash and near-cash allocations are above the global average 27

4.1.5. Property is still a minor share of the typical HNW portfolio 30

4.1.6. Russian investors opt for structured products 32

4.1.7. Commodities allocations beat the European average 34

5. HNW PRODUCT AND SERVICE DEMAND 37

5.1. Demand for tax planning services is forecast to increase strongly 37

5.1.1. Demand for financial planning is higher than average 37

5.1.2. Internationally active millionaires require advice on tax matters 38

5.1.3. Sberbank caters for clients’ tax planning needs 40

6. APPENDIX 41

6.1. Abbreviations and acronyms 41

6.2. Definitions 41

6.2.1. Affluent 41

6.2.2. HNW 41

6.2.3. Liquid assets 41

6.2.4. Mass affluent 41

6.3. Methodology 42

6.3.1. GlobalData’s 2016 Global Wealth Managers Survey 42

6.3.2. GlobalData’s 2015 Global Wealth Managers Survey 42

6.3.3. GlobalData’s WealthInsight 42

6.3.4. Exchange rates 43

6.4. Bibliography 43

6.5. Further reading 45

List of Figures

Figure 1: Women are still under-represented in the Russian HNW population 6

Figure 2: Business ventures account for a high proportion of HNW wealth 7

Figure 3: Russian wealth is mainly derived from the mining, oil, and gas industry 8

Figure 4: Most HNW investors’ job titles reflect the Russian economic landscape 9

Figure 5: Expats form a larger proportion of the Russian market than the European average 11

Figure 6: US nationals account for an increasing proportion of the Russian expat population 12

Figure 7: Citi Bank targets Russia’s wealthy expats 13

Figure 8: Wealth managers in Russia should lead with advisory mandates 15

Figure 9: A lack of expertise is the major driver of demand for wealth management services 16

Figure 10: The vast majority of Russian HNW investors use more than one advisor 17

Figure 11: HNW demand is highest for advisory services 18

Figure 12: Advisory asset management will experience the highest increase in demand 19

Figure 13: HNW investors in Russia are reluctant to relinquish control 20

Figure 14: Wealth managers should develop execution-only propositions 21

Figure 15: Russian HNW investors’ portfolios are dominated by deposits 23

Figure 16: Most equity investments are held directly 24

Figure 17: Equities growth will be driven by dividend income opportunities 25

Figure 18: Bonds constitute a sizable portion of HNW portfolios 26

Figure 19: Bond investments are forecast to increase further 27

Figure 20: Cash and near-cash allocations are much higher in Russia than globally 28

Figure 21: Deutsche Bank Private Wealth Management offers a wide spectrum of investment options 29

Figure 22: A desire to maintain liquidity will drive cash and near-cash investments growth 30

Figure 23: Property funds are significantly more popular than direct holdings 31

Figure 24: Opinion about future property demand is mixed among wealth managers 32

Figure 25: Structured products are the most popular alternative investment 33

Figure 26: Moderate growth for Russian alternatives is to be expected 34

Figure 27: Russian HNW investors’ commodity allocations are mostly held directly 35

Figure 28: Commodity investments will stagnate over the next year 36

Figure 29: Financial planning is a priority for Russian HNW investors 38

Figure 30: Wealth managers should lead with tax planning services 39

Figure 31: Sberbank offers tax advice to its clients 40